CHAPTER II

THEORETICAL FOUNDATION

This chapter examines the relevant theories to be the theoretical foundation of the present

study. It also elaborates the general conceptual foundation, theoretical foundation for each

variable and linkages between variable. The supporting theoretical foundations that will include

e-marketing, endorsement, celebrity, Instagram, trust, perceived usefulness of celebrity

recommendations, attitude, celebrity’s reputation, intention to shop online, and the linkages of

variables within this study. At the end of this chapter, the model of the research will be presented

to show clear relationship variables shown by propositions as proposed from the linkages of

variables.

2.1 E-Marketing

Marketing is a living subject, mainly because it is evolving dynamically. The evolution of

marketing influenced by technology has become e-marketing. According to Strauss and Frost

(2014), e-marketing is the use of information technology for the marketing activity and the

processes for creating, communicating, delivering, and exchanging offerings that have value for

customers, clients, partners, and society in large. More simply defined, e-marketing is the result

of information technology applied to traditional marketing.

Strauss and Frost (2014) also stated that e-marketing involves much more than basic

technologies and applications. E-marketing today involves web 2.0 which technologies also

connect people with each other for producing and sharing contents (also known as social media).

With this new technology, this creates opportunities and challenges for marketers, which are:

1. Power Shift From Sellers to Buyers

Savvy customers and high technology has given a power to control the feed from marketers.

Firstly, customers trust each other more than companies. More than 50% said they find “a

person like yourself” to be more trustworthy. Website 2.0 has given customers a power to

exchange information to potential customers and influence them to buy or not to buy the

product from the companies. Secondly, social commerce (an evolution from e-commerce as a

result from huge rising of social media) has become facilitation for customers to exchange e-

WOM such as giving testimonials or recommendations, even endorsement.

2. Customer Engagement

Having customers uploading videos, photos, posting comments on a blog, or becoming a fan

in company’s Facebook page are examples of customer engagement. Customer becomes

attached or engaged to products or companies emotionally and intellectually, thus they

become more attentive and favorable toward the product or company.

3. Content Marketing

Content marketing is a strategy involving creating and publishing content on Web sites and

in social media. It is crucial for marketers to create engaging content to make customers

entice the content.

4. Inbound Marketing

In traditional media, marketers cannot reach a large quantity of customers, however, as time

goes by and technology reach customers, they are all over internet and social media. Inbound

marketing components are contents (videos, blogs, eBooks, etc.), social networks, and search

engine optimization to get the company’s social media or website come up on the first page

of result of keyword results.

New technologies open the door to new marketing strategy and tactics, however the aim

of e-marketing is to meet and satisfy target customers’ needs and wants better than

competitors-just like traditional marketing.

E-marketing can be considered to be equivalent to Internet marketing and Digital

Marketing. Most in the industry would look at it this way. However, E-marketing is sometimes

considered to have a broader scope than Internet marketing since it refers to digital media such as

web, e-mail and wireless media, but also includes management of digital customer data and

electronic customer relationship management systems (E-CRM systems). Here are some of the

advantages of e-Marketing:

Extremely low risk

Reduction in costs through automation and use of electronic media

Faster response to both marketers and the end user

Increased ability to measure and collect data

Opens the possibility to a market of one through personalisation

Increased interactivity

Increased exposure of products and services

Boundless universal accessibility

Following are some disadvantages of e-Marketing:

Dependability on technology

Security, privacy issues

Maintenance costs due to a constantly evolving environment

Higher transparency of pricing and increased price competition

Worldwide competition through globalisation

From a marketing perspective, blogging has been viewed as a new type of electronic

word-of-mouth (eWOM) (Osman et al., 2009). It has been established that a bloggers’ perceived

credibility ultimately leads to consumers’ adoption of eWOM recommendation (Cheung et al.,

2009). Moreover, another study has verified that future product sales, such as for music albums,

are positively correlated with the volume of blog posts (Dhar and Chang, 2009). Therefore, in

our study, it is inferred that a majority of blog readers finalize their purchasing decisions by

reading reviews, interacting with bloggers or complying with a blogger’s recommendation.

The purpose of this study is to examine the correlations between a blog reader’s trusting

belief in bloggers, the perceived usefulness of a blogger’s recommendation, and the subsequent

influence trust and perceived usefulness have on the blog reader’s attitudes and behavioral

intentions in an online shopping context. In addition, blogger’s reputation as source credibility is

also considered an influential factor in swaying consumer’s decision to buy a certain product. A

study done by Jain and Posavac (2001) concluded that high-credibility source will be more

persuasive in influencing consumers’ purchasing behavior. Moreover, Park and Lee (2009)

mentioned that the consumer is more likely to believe in an endorsed eWOM about a product if it

is from a highly credible source (highly reputable web site). Therefore, this study also includes

the blog’s reputation as extrinsic cues of eWOM information quality to test the moderating effect

of a blogger’s reputation on readers’ purchasing intentions.

2.2 Instagram

Ashley Ha (2015) defined Instagram as one of many popular social media applications that is

used on daily basis. Instagram is a simple application about snapping and sharing photos that was

created on 6th of October, 2010 by Kevin Systrom and Mike Krieger. Instagram is largely made

up of urban and youthful demographic, about 70% are women. the heavy using of Instagram has

made marketers found a new and niche field for marketing.

Instagram is a free photo sharing network where it is simple to share pictures and short

videos with others. Instagram was launched in October 2010 and the monthly users are over 150

million people with an increase of people downloading the app in 66 percent from year-toyear

(Smith, 2014). Instagram gathered more than twelve million members the first year (CIPR, 2012)

and there are currently 55 million pictures that are being uploaded every day (Ahmad, 2014).

Instagram describes themselves as “a fun and quirky way to share your life with friends through

a series of pictures. Snap a photo with your mobile phone, then choose a filter to transform the

image into a memory to keep around forever. We're building Instagram to allow you to

experience moments in your friends' lives through pictures as they happen. We imagine a world

more connected through photos” (Instagram, 2014).

According to a survey made by the Pew Research Center’s Internet & American Life

Project the most frequent users of Instagram are women between 18-29 and 13 percent of all

social media users do use Instagram (Brenner & Duggan, 2013). The Internet Infrastructure

Foundation has a service and website called Swedes and the internet who states that Instagram is

the media of the youth (Findahl, 2013). The most active users on Instagram in Sweden are

women in the ages 12-15 and 20-25 (Findahl, 2013). Instagram have given the youths a

gathering place for their photos and it has made it possible for them to post their pictures and

share the pictures among friends (Findahl, 2013).

2.3 Endorsement

An endorser is a person, most commonly a well-known person, who appears with a product in an

advertisement saying or indicating that they use and like the product (Cambridge Dictionaries

Online). Nowadays it is very common for a marketer to use celebrity endorsement in order to

increase sales and extend their market shares. The benefits that celebrity endorsement contributes

to marketing are the influence on favorable word-of-mouth, increasing brand loyalty and

purchasing certain brands (Schiffman et al., 2012, pp. 301 & 303).

Celebrity endorsement has been established as one of the most popular tools of

advertising in recent time. It has become a trend and perceived as a winning formula for product

marketing and brand building. It is easy to choose a celebrity but it is tough to establish a strong

association between the product and the endorser. While the magnitude of the impact of celebrity

endorsement remains under the purview of gray spectacles, this paper is an effort to analyze the

impact of celebrity endorsements on brands.

Endorsement is a channel of brand communication in which a celebrity acts as the

brand’s spokesperson and certifies the brand’s claim and position by extending his/her

personality, popularity, stature in the society or expertise in the field to the brand. In a market

with a very high proliferation of local, regional and international brands, celebrity endorsement

was thought to provide a distinct differentiation (Martin Roll, 2006). McCracken's (1989)

definition of a celebrity endorser is, "any individual who enjoys public recognition and who uses

this recognition on behalf of a consumer good by appearing with it in an advertisement

(marcoms), is useful, because when celebrities are depicted in marcoms, they bring their own

culturally related meanings, thereto, irrespective of the required promotional role." Ohanian

stresses that to be truly effective, celebrities chosen as endorsers should be knowledgeable,

experienced and qualified in order to be perceived as an expert in the category. Two models were

originally identified to explain the process of celebrity endorsement. As an endorser, one has to

fulfill all the FRED objectives (Rajesh Lalwani, 2006), namely, Familiarity (target market is

aware of him, finds him friendly, likeable and trustworthy); Relevance (which says that there

should be a link between the endorser and the product as well between the endorser and the

audience); Esteem (credibility to the mass); Differentiation (in all his projections, he is seen to be

one among the masses, and yet he towers above them. He is different).

2.4 Celebrity

According to Cambridge Dictionaries Online, celebrity is someone who is famous,

especially in the entertainment business. A person who exceeds certain numbers of followers can

also be considered as Instagram Celebrity although they may not have any achievement; people

might simply just be attracted of the content of their Instagram. In Instagram, there is a term

“Instafamous” which is a person who's famous on the popular app Instagram because they have

thousands of followers. Person is usually a pretty girl who posts a thousand pictures of her face

or whatever food she's eating and may include pictures of other people's food (Urban Dictionary

Online, 2012). Celebrities are hired because they are perceived to be more credible endorser of

products compared to non-celebrities. (Muda et al 2013).

Schiffman et al., (p.301) defines celebrities as film stars, television personalities and

popular entertainers and sports icons who give a common type of reference group appeal. A

reference group is defined as a person or group of people who serves as a reference to an

individual in forming values and attitudes, or behavior. Also, reference groups provide

individuals with a reference in their purchase or consumption decisions (Schiffman et al., 2012,

pp. 295-296). According to Friedman & Friedman (1979) as cited in Phang & Ernest (n.d.), a

celebrity refers to an individual who is known to the public. This identification is based on

admiration, aspiration, empathy or on recognition. The benefits that celebrity endorsement

contributes to marketing are the influence on favorable word-of-mouth, increasing brand loyalty

and purchasing certain brands (Schiffman et al., 2012, pp. 301 & 303). Since the celebrity

endorsement benefit to the market, two related theories are described which are celebrity

endorsement effectiveness under Ohanian (1990) measurement scale and celebrity and product

congruence under the meaning transfer process theory of McCracken (1989).

Celebrities are viewed as more credit, expert and trustworthy than non-celebrities

(Ohanian, 1990). Therefore, most companies even large or small use celebrity endorsers to

promote their brand and product. The newer or smaller organization gains higher awareness in a

short time by using well-known celebrities (Wheeler, 2003). According to Dickenson (1996) as

cited in Hunter (2009), celebrities turn an unknown product into a recognized product by

persuading positive feelings toward advertising.

Belch & Belch (2003, p.168) stated that the characteristics of the celebrity affect the sales

and advertising message of the company. As a result, the company has to select celebrity whose

characteristics maximize the sending message to target customers. When a company decides to

use celebrity endorsement, they need to carefully selecting with three source factors which are

source credibility, source attractiveness, and source power.

2.5 Trust

Trust is defined as perceived credibility and benevolence of a target of trust. (i.e the other

party). From customer’s perspective, product information from various reference groups and

personal media such as blog are needed to reduce transaction uncertainty (Hsu et al. 2012). This

definition of trust is relevant to the context of online shopping, since Instagram can be

considered as picture blog. In recent years, many studies have explored the relationship between

trust and shopping behavior in online shopping context.

Trust has been viewed as the perceived credibility and benevolence of a target of trust

(Ganesan 1994; Kumar, Scheer and Steenkamp 1995). The first dimension of trust thus focuses

on the objective credibility of an exchange partner, an expectancy that the partner’s word or

written statement can be relied on (Lindskold 1978). The second dimension of trust,

benevolence, is the extent to which one partner is genuinely interested in the other partner’s

welfare and is motivated to seek joint gain. These views of trust identified so far consider trust to

be a central function in the management of risk, indeed without trust, risk is unmanageable and

thus business relationship development, including adaptation, would not be possible (Morrison

and Firmstone 2000).

Trust can also be viewed in the wider context of the cultural boundaries that exist. Hagan

and Choe (1998) investigated trust within the Japanese interfirm context. Interestingly, they

conclude that whilst intuitively a higher level of trust may be expected to exist, this was not the

case. They found that the higher level of sanctions which operated through both contractual and

social relationships were key determinants of interfirm co-operation rather than higher levels of

trust within the relationship.

2.6 Perceived Usefulness of Celebrity Recommendation

Usefulness is defined as “the degree to which a person believes that using a particular

system would enhance his or her job performance (Hsu et al 2012). Perceived usefulness would

have effects on attitude and intention, buying intention in this case. Usefulness of celebrity

recommendation, in Instagram case, can be measured by increasing numbers of followers,

increasing numbers of likes, increasing numbers of mentions, increasing online shop’s sales.

Previous studies on consumer behavior have indicated that reference groups influence

consumers’ purchasing behavior (Bearden and Etzel, 1982; Childers and Rao, 1992; Engel et al.,

1993). Recommendations from such groups actually play an important role in consumers’

decisions particularly when purchasing expensive and/or new products and services is concerned.

To reduce risk and uncertainty in buying, consumers usually depend on opinions or suggestions

from others to evaluate purchases (Brown and Reingen, 1987; Kotler, 1999). In addition, the

theory of reasoned action (TRA) also suggests that an individual may develop beliefs by

referring to information from or normative practices of a group and peers. Consequently, these

beliefs will influence individual behavioral intention.

2.7 Attitude

Attitude in this context refers to consumer’s behavior. Behavior, according to Mullen and

Johnson (2013) is typically defined as an act or a response. In this context, attitude or consumer

behavior refers to the actual purchase or use of the product. In Instagram, consumer behavior or

attitude can be measured by whether the customer follows, likes, posts, and gives testimonials

about the products.

An attitude is an evaluation of an attitude object, ranging from extremely negative to

extremely positive. Most contemporary perspectives on attitudes also permit that people can also

be conflicted or ambivalent toward an object by simultaneously holding both positive and

negative attitudes toward the same object. This has led to some discussion of whether individual

can hold multiple attitudes toward the same object.

An attitude can be as a positive or negative evaluation of people, objects, events,

activities, and ideas. It could be concrete, abstract or just about anything in your environment,

but there is a debate about precise definitions. Eagly and Chaiken, for example, define an attitude

as "a psychological tendency that is expressed by evaluating a particular entity with some degree

of favor or disfavor." Though it is sometimes common to define an attitude as affect toward an

object, affect (i.e., discrete emotions or overall arousal) is generally understood to be distinct

from attitude as a measure of favorability.Attitude may influence the attention to attitude objects,

the use of categories for encoding information and the interpretation, judgement and recall of

attitude-relevant information. These influences tend to be more powerful for strong attitudes

which are easily accessible and based an elaborate knowledge structure. Attitudes may guide

attention and encoding automatically, even if the individual is pursing unrelated goals.

2.8 Reputation

In Instagram, the reputation of celebrity can be determined by the number of followers

and likes on every post. Needless to say that a company would be more attracted to endorse on a

celebrity that has bigger and better reputation on Instagram rather than the one who is not famous

enough. Hsu has compiled certain studies that empirically verified that reputation significantly

affects trust or behavioral intention on online shopping. E-WOM communication refers to any

positive or negative statement made by potential, actual, or former customer about a company or

product, which is made available to a multitude of people and institution via Internet (Teng, et al

2014).

Understanding whether a blogger’s reputation is a moderating variable is obviously

important. In many studies, reputation has been mostly regarded as an antecedent of trust or

behavioral intention. In fact, these studies empirically verified that reputation significantly

affects trust or behavioral intention (Casalo et al., 2008; Keh and Xie, 2009; Koufaris and

Hampton-Sosa, 2004). However, few studies have been conducted on whether reputation

moderates the effects of hypothesized constructs. Since blog posting is also a form of user-

generated content (UGC), the influences of a “credible” blogger are different from a “not

credible” one (Burgess et al., 2009). Therefore, we believe that bloggers with different level of

reputations will influence readers’ perceptions of the respective contents differently. For

example, through a normative effect, a highly reputable blogger may become an opinion leader

influencing others to shop online.

2.9 Intention to Shop Online

Internet marketers have been particularly concerned about their ability to simulate direct

experiences for products in a virtual context (Hawkins and Mothersbaugh, 2010). They also

stated the eight online shopper segments based on online attitudes, which are shopping lovers –

enjoy buying online and do so frequently, adventurous explorers – require little special attention

by Internet vendors as they believe online shopping is fun, suspicious learners – is reluctant to

purchase online as they are lack of computer training, business users – use the Internet primarily

for business purposes and do not view online shopping as novel, fearful browsers – love

“window shopping” but are afraid about credit card security, shipping charges, and buying

products sight unseen, shopping avoiders – like to see the merchandise in person before buying,

technology muddlers – spend less time online, fun seekers – see entertainment value in the

Internet but are afraid of buying things online.

The theory of comparison approach provides a helpful method of predicting information

technology (IT) usage behavior and intention, while the individual theoretical models have their

own distinct advantages. For example, Chau and Hu found that TAM to be superior to TPB in

its ability to examine physician acceptance of telemedicine technology. Analysis of buyer

behavioral intentions in the context of electronic procurement provides another example.

Moreover, Gentry and Calantone recommended TAM as superior to the TRA and TPB

models in its ability to predict buyer behavioral intentions. Another example has demonstrated

that the three models (TAM, TPB, and decomposed TPB model) are roughly equivalent in terms

of their ability to explain and predict user acceptance of new technology. Furthermore, online

shopping is similar to general Internet-based IS that have a significant impact on individual

decision-making behaviors and Internet marketing strategies. Hence, this study suggests that

simultaneously testing the three competing models (TAM, TPB, and decomposed TPB model)

can help understand consumer intentions to shop online. However, very limited empirical

research has been performed to examine and compare the validity and explanatory utility of

prevalent intention-based theories in the context of online shopping.

2.10. Relationship between variables

This research aims to test how significant the influence of the one variable to another. Hence,

before going to the test, theoretical foundation behind the relationship is elaborated to shows

effect of one variable towards another.

2.10.1 The relationship between perceived usefulness toward celebrity’s recommendation,

attitude, and intention to shop online.

Usefulness is defined as “the degree to which a person believes that using a particular system

would enhance his or her job performance” (Davis, 1989). In the context of blog, current work

treats usefulness as perceived usefulness of celebrity’s recommendations. Therefore, this study

redefined the usefulness as “the degree to which an Instagram users believe that adopting a

celebrity’s recommendation would enhance their online shopping performance”. Previous

research has empirically confirmed that perceived usefulness has significant effects on attitude

and intention (Hsu and Lu, 2004; Lin and Lu, 2000; Yu et al., 2005). Accordingly, the following

hypotheses were proposed:

H1a. Perceived usefulness of celebrity’s recommendation will positively effect Instagram

users’ attitude toward online shopping.

H1b. Perceived usefulness of celebrity’s recommendation will positively affect Instagram

users’ intention to shop online.

2.10.2 The relationship between trust, perceived usefulness, attitude, and intention to shop online.

Similarly, past studies had empirically verified that trust significantly affected the attitude (Suh and Han, 2002; Wu and Chen, 2005). Moreover, studies such as Lim et al. (2006 and Hsiao et al. (2010) also noted that trust positively influences attitude and shopping intention, the results of those studies being consistent with those obtained in an earlier study by Jarvenpaa et al, (2000).

Therefore, we propose that trust will positively affect Instagram users’ attitudes toward online shopping and behavioral intention to shop online.

Furthermore, well-known theories such as TAM, TRA and theory of planned behavior (TPB) also indicate that the individuals’ behavioral intention is influenced by their attitude toward the concerned behavior. For this study, we define the attitude as the degree of an Instagram user’s positive feelings about online shopping. Empirical studies based on these theories have found that attitude positively affect an individuals behavioral intention (Hsu and Lu, 2007; Kim et al., 2009). Accordingly, the following hypotheses were proposed:

H2a. Trust will positively affect Instagram users’ perceived usefulness.

H2b. Trust will positively affect Instagram users’ attitudes toward online shopping intentions.

H2c. Trust will positively affect blog readers’ intentions to shop online.

H3. Instagram users’ attitudes toward shopping online will positively affect their intention to shop online.

2.10.3 The relationship between celebrity’s reputation, trust, attitude, and perceived usefulness toward celebrity’s recommendation (Moderator Variable)

In many studies, reputation has been mostly regarded as an antecedent of trust or

behavioral intention. In fact, these studies empirically verified that reputation significantly

affects trust or behavioral intention (Casalo et al., 2008; Keh and Xie, 2009; Koufaris and

Hampton-Sosa, 2004). However, few studies have been conducted on whether reputation

moderates the effects of hypothesized constructs. Since blog posting is also a form of user-

generated content (UGC), the influences of a “credible” blogger are different from a “not

credible” one (Burgess et al., 2009). Therefore, we believe that bloggers with different level of

reputations will influence readers’ perceptions of the respective contents differently. For

example, through a normative effect, a highly reputable blogger may become an opinion leader

influencing others to shop online.

Based on the recommendation by the source, a persuasive message will influence the

Instagram users’ confidence on a specific product/service (Shamdasani et al,. 2001). Empirically,

Perceived usefulness of Celebrity’s recommendations

Trust

Attitude Intention to shop online

Celebrity’s reputation (as a moderator)

Park and Lee (2009) stated that the web site reputation has significant impact on the eWOM

effect. Their study revealed the eWOM effect is grater for web sites with established reputations

than for less established web sites. This web site source effect is likely to be applied to Instagram

context. Instagram confidence brought about by a credible celebrity might influence the e WOM

posted on Instagram page. Moreover, eWOM platform such as Instagram to which the review is

posted can be a potential factor in influencing customers’ product judgement (Lee and Youn,

2009). Therefore, the following hypothesis was proposed:

H4. A celebrity’s reputation will affect the all the hypotheses relationships.

2.11 Conceptual Model

Based on the relationship shown through propositions mentioned earlier, this research derives a

model adopting from Hsu et al (2012):

Figure 2.1 Proposed Research Model

Source: Replication from Journal of Hsu et al (2012)

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